Protection of Intellectual Property Rights – A special Problem

Companies spend millions of dollars establishing brand names or trademarks to symbolize quality and design a host of other product features meant to entice customers to buy their brands to the exclusion of all others. Millions more are spent on research to develop products, processes, designs and formulas that provide companies with advantages over their competitors. Such intellectual or industrial properties are among the more valuable assets a company may possess. Brand names such as Kodak, Coca-Cola and Gucci, processes such as xerography, and computer software are invaluable. One financial group estimated that the Marlboro brand had a value of $ 33 billion, Kelloggs’ $ 9 billion, Microsoft $9.8 billion, and Levi’s $5 billion; all have experienced infringement of their intellectual property rights. Normally property rights can be legally protected to prevent other companies from infringing of such assets. Companies must, however, keep a constant vigil piracy and counterfeiting.

Counterfeiting and Piracy:

Counterfeit and pirated goods come from a wide range of industries – apparel, automotive parts, agricultural, chemicals, pharmaceuticals, books (even management books), records, films computer software, baby formula to auto parts. Estimates are that more than 10 million fake Swiss timepieces carrying famous brand names such as a Cartier and Rolex are sold every year, netting illegal profits if at least $ 500 million. Although difficult to pinpoint total sales from the unauthorized use of US patents, trademarks, and copyrights amount to more than $ 300 billion annually. That translates into more than two million lost jobs. Software music and movies are especially attractive targets for pirates because they are costly to develop but cheap to reproduce and distribute over the Internet. Pirated CD music sales are estimated to exceed $ 5 billion annually and are growing at 6 percent per year. And unauthorized US software that sells for $ 500 in this country can be purchased for less than $ 10 in East Asia. The business Software Alliance a trade group, estimates that software companies lost over $7.9 billion in the Asia Pacific region, $12.1 billion in Europe, and $ 7.5 billion North America in 2004. One might conclude from perusing Exhibit that china is the biggest piracy problem given its high ranking and large size. However, the dollars lost in the United States because of software piracy is almost double that of China at $6.6 billion versus $3.6 billion, respectively The good news in the data is that piracy rates are dropping in China (down 2 percent from the previous year) and globally (down 1 percent) primarily due to education programs and enforcement.

The piracy industry has grown so sophisticated that many counterfeit goods are almost impossible to distinguish from the original. Toys, a popular knock off candidate, are often counterfeited and sold before the original ones arrive in legitimate stores. Copies are churned out in the same Chinese town where the originals are made. To thwart counterfeiters, Microsoft included a hologram on its software boxes and packaging, but it too has been duplicated to such perfection that the packages containing knockoff CDs of Windows NT are almost indistinguishable from the original. A genuine Chinese language version of Windows XP comes in a shrink wrapped box with the familiar logo and costs $245 about four months salary of an average Chinese worker. The retail price is too much for the worker to pay but there is an alternative – a nearby stand sells illegally copied XP CDs or $ 5.50 a CD. More than 90 percent of the application software used in China is estimated to come from illegal copies. —